Is Business Credit Card Interest Tax-Deductible?

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Sometimes it may be possible to claim an interest deduction for your purchase by using a payment method other than credit cards.
Credit card interest deductions are a valuable but often overlooked way to reduce your business’s tax liability.
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Like personal cards, business credit cards carry interest charges if not paid in full each month. Many types of business expenses paid with a credit card can be deductible. Common examples include office supplies, travel expenses, and certain meal and entertainment costs, subject to limitations.

Well-organized records help you pass audits and claim deductions without stress.
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Tax time is always an adventure, particularly for entrepreneurs and small business owners.
Business credit cards operate like personal credit cards, but they can help build your business credit because they typically report to commercial credit bureaus.

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The key factors determining deductibility are the business purpose of the underlying costs, your business structure, and your record-keeping practices. To avoid these calculations and simplify your tax situation, consider using separate cards for business and personal expenses. Did you know that grace periods on credit cards provide a convenient window to pay off major purchases without accruing interest? But, if you don’t pay your balance in full by the due date, that grace period vanishes—leaving you to shoulder interest charges, according to Chase. While you can’t deduct the principal amount of credit card payments, businesses can deduct interest and some fees related to business purchases made with the card. While business interest payments are deductible, late payment fees and penalties are not.

Be diligent in evaluating the redemption value of each card’s rewards. Business cardholders are incentivized with 5,000 anniversary bonus miles to maintain a personal United credit card as well, which might make sense for die-hard United fliers. CreditCards.com credit ranges are derived from FICO® Score 8, which is one of many different types of credit scores. If you apply for a credit card, the lender may use a different credit score when considering your application for credit. With online applications, it’s possible that you could receive approval for a business card within 48 hours. However, some credit card companies can take as long as 10 days to decide.

This may all seem a bit convoluted, but there are steps you can take to make things much simpler when it comes time to file your return. Be prepared for potential audits by maintaining organized and accurate records. Having detailed documentation readily available can help resolve any issues quickly and efficiently.

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FAQs for Business Credit Cards

First, instead of using a personal credit card for business expenses, be sure to maintain a separate credit card account for personal use and a business credit card for all your business-related expenses. This will make the process of tracking and computing interest-related deductions far more convenient, and you may also have access to the valuable rewards and benefits that business cards often offer. Using a business card can also help to build a strong credit history for the business, making it easier to secure loans and lower interest rates in the future. These bonuses typically require that you spend a certain amount of money in a specific period after opening the card. One way to meet the spending requirement is to pay your taxes with a credit card. Examples of expenses that generate deductible interest include purchases of inventory, office supplies, marketing expenses, professional services, and operating costs.

Conversely, if a business credit card is used for personal expenses, the interest attributable to those personal charges is not deductible. Personal credit card interest has not been deductible since the Tax Reform Act of 1986. Interest and fees on cash advances from business credit cards are usually not deductible, even if the funds are used for business purposes. Using a personal credit card for business expenses doesn’t automatically make the interest deductible. You may only deduct the interest if you carefully track and document the business-related charges.

Although not an exhaustive list, common examples include buying clothes, electronic equipment, cars and food using a credit card. When you make monthly payments that include interest, it is always nondeductible personal interest. This remains true even if you use the credit card to subsidize the purchase of your home. Meticulous record-keeping is necessary to substantiate credit card interest deductions for business. You should retain credit card statements, receipts, and invoices for all business-related purchases.

Specifically, when a credit card says “terms apply,” I’m actually reading those terms. I’ve been juggling multiple credit cards for decades to maximize rewards, and I’ve held credit cards on multiple continents. To get a business credit card, start by checking your credit score and getting prequalified to gauge your approval odds. Then compare card options, choose the one that fits your needs and complete an application with your business details. If approved, you’ll typically receive the card by mail within seven to 10 days.

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Plus, earn an additional $2,000 cash bonus for every $500,000 spent during the first year. You’re allowed to take a tax deduction for some types of interest payments, but unfortunately, credit card interest is not among them. The tax code classifies is interest on a business credit card deductible the interest you pay on credit cards as “personal interest,” a category that hasn’t been deductible since the 1980s. If you fail to keep records or receipts for business-related credit card expenses, you may not be able to claim the deduction in case of an audit. You can deduct business-related expenses such as office supplies, travel, advertising, professional services, and equipment.

Others tend to carry a balance from month to month; they’re better served with a card that offers a low ongoing interest rate. Still others are working to improve their credit; issuers have cards designed for those people, too. On the other hand, a 0 percent APR credit card can be a helpful tool if you’re planning a large purchase or need to pay down existing debt. These offers typically apply for a limited time, during which you won’t accrue interest on purchases or balance transfers.